Abstract
M.Comm.
The use of equity incentives has gained popularity since the early nineties for various reasons. Some of these are the need to attract and retain executives, management’s desire to share in global asset price growth, aligning managers and shareholders’ objectives and the perceived low cost of granting options as part of the compensation package. The main objective of equity based compensation plans are on aligning management goals with those of shareholders. This study examined the relationship between equity based compensation and price to book values of retail firms listed on the Johannesburg Stock Exchange. Many listed firms replaced fixed salaries of executives with variable performance pay components such as cash bonuses, share purchase programmes, share options or share grants. Researchers are divided whether equity compensation is efficient and there is currently no theoretical or empirical consensus on how equity compensation affects firm performance. The results of the study indicated a statistical insignificant relationship between share based payments and change in price to book values. More effective equity incentive plans need to be put in place as the current share option schemes most firms employ, are not achieving their objectives.